The price of Gas is up, again

Three completely connected headlines, all different aspects of the rise in gasoline prices.  Three sides of the same coin.  Notice how all the headlines either contain a number or refer to one?

World food prices at fresh high, says FAO

3 February 2011 Last updated at 12:56 ET

World food prices rose to a record high in January, according to the UN’s Food and Agricultural Organization (FAO).

The FAO Food Price Index, which measures the wholesale price of basic foods within a basket, averaged 231 points last month – its highest level since records began in 1990.
It was up 3.4% from December, the seventh monthly rise for the index.


Shell annual profits double to $18.6bn

3 February 2011 Last updated at 14:37 ET

The oil giant Shell has reported profits almost doubled from $9.8bn to $18.6bn (£11.5bn) for 2010, partly thanks to rising oil prices and output.

Its chief executive, Peter Voser, said the company had made good progress and that there was “still more to come”.

During the year, the company made $7bn of acquisitions and invested $3bn in exploration.


One in five workers ‘fears losing job’, CIPD says

3 February 2011 Last updated at 19:01 ET

One in five UK workers fear they could lose their jobs, a survey has said.

In the public sector, that figure rises to nearly one in three workers, the Chartered Institute of Personnel and Development (CIPD) said.

The organisation is calling on managers to demonstrate high-quality leadership in order to raise morale and engagement in the workplace.

More than half of those surveyed also claimed that their employer had either frozen or cut pay.

The price of Gas is up, again

The world’s tallest skyscraper a white elephant?

At a certain point, long ago reached, very tall towers are no longer economical, even if they are technically possible.  So I am not surprised:

World’s tallest tower in UAE closes

The world’s tallest skyscraper in Dubai has unexpectedly closed to the public a month after its lavish opening, the tower’s owner said.

The Burj Khalifa [known as the Burj Dubai during construction]was closed due to “unexpected high traffic,” and “technical issues with the power supply”, Emaar Properties said on Monday.

By the numbers:

828m – height
57 – number of lifts
169 – number of floors
1,044 – number of apartments
31,400 – tonnes of steel used
330,000 – cubic metres of concrete used
$1.5bn – estimated cost
95 km – the distance it can be seen from
10C – cooler at the top than the bottom
158 – floor where “highest” mosque is planned
76 – floor of “highest” swimming pool
12,000 – number of labourers who toiled
$5 – daily wage of a labourer

The world’s tallest skyscraper a white elephant?

The difference between Europe and America

The difference between Europe and America:

Rich Germans Demand Higher Taxes

A group of rich Germans has launched a petition calling for the government to make wealthy people pay higher taxes.

The group say they have more money than they need, and the extra revenue could fund economic and social programmes to aid Germany’s economic recovery.

Germany could raise 100bn euros (£91bn) if the richest people paid a 5% wealth tax for two years, they say.

The petition has 44 signatories so far, and will be presented to newly re-elected Chancellor Angela Merkel.

The group say the financial crisis is leading to an increase in unemployment, poverty and social inequality.

Simply donating money to deal with the problems is not enough, they want a change in the whole approach.

“The path out of the crisis must be paved with massive investment in ecology, education and social justice,” they say in the petition.

Those who had “made a fortune through inheritance, hard work, hard-working, successful entrepreneurship, or investment” should contribute by paying more to alleviate the crisis.

The man behind the petition, Dieter Lehmkuhl, told Berlin’s Tagesspiegel that there were 2.2 million people in Germany with a fortune of more than 500,000 euros.

The difference between Europe and America

Responding to “intelligent libertarianism”

a post in which eee_eff will not let certain oxymorons slide on by without notice…

Anytime I see the word “intelligent” close to the word “libertarian” in a recent (since 1993 or so) context, alarm bells start ringing.  So when I see this piece by Tyler Cowen (covering another piece by Matt Yglesias), I have to respond:

Matt Yglesias outlines an intelligent version of libertarianism

Picking up my previous request, Matt responds:

I think libertarianism is best understood as a kind of esoteric doctrine. There’s strong evidence to believe that people who overestimate their own efficacy in life wind up doing better than those with more accurate perceptions. It follows that it’s strongly desirable for society to be organized so as to bolster myths of meritocracy. This will lead to individual instances of injustice and to a lot of apparently preventable suffering, but over the long-term the aggregate impact of growth (which, of course, compounds) on human welfare will swamp this as long as we can maintain the spirit of capitalism.

A separate issue is the welfare of the world’s poorest. Progressive internationalists have this kind of dopey vision of trying to make trade and immigration policy win-win-win for everyone by using redistributive taxation to ensure that everyone shares in the benefits. That sounds nice, but it means that in addition to trying to conquer people’s racist and nationalistic instincts you’re also engaged in a fight to pry wealth out of the hands of the wealthy and powerful. As a political strategy, it doesn’t really make much sense. Why not simply join forces with the wealthy and powerful so as to create a political coalition that’s plausibly capable of overwhelming xenophobia and creating borders that are relatively open to the flow of goods and labor?

That is exactly the kind of response I was hoping for and both points make sense to me.  Here is a related Matt post on progressivism and America.

I would add that Matt’s description is consistent with my belief that the United States should be less progressive than the polities of north and western Europe.  For better or worse, most Europeans are more skeptical of claims of capitalist meritocracy and thus it is harder for them to realize gains by internalizing such an ethic.  Furthermore the non-progressive nature of many aspects of America — by encouraging economic dynamism — helps Europe to be as progressive as it is.  That’s an argument for American capitalism that both libertarians and progressives ought to feel slightly uncomfortable with, yet in my view it is compelling.

First, full disclosure:  I am an unrepentant Europhile, for which I will make no apologies.   Further, as an architect and an urbanist, my perspective is that we are uprooting our society from its traditional spatial and organizational roots, and this grand experiment needs to be called what it is: an experiment, with unknown results.  Libertarian proposals, were they enacted, would only speed this ongoing demolition of the public space.

I am also concerned that the libertarian/capitalist triumphalism stream of thought (cf Thomas Friedman) seems to distill everything down to a purely economic measure, which is exactly what those whom the libertarians worship but apparently very rarely ever read (e.g. Adam Smith, Schumpeter, von Hayek) warn against doing (here’s a post which includes a relevant quote of Schumpeter).   Of course, neither Tyler nor Yglesias stop to actually discuss the criteria or metrics they believe are important, so I’d invite them to clarify that point.

With the disclosure out of the way this is my reply:

Continue reading “Responding to “intelligent libertarianism””

Responding to “intelligent libertarianism”

Katherina Pister’s comments at VOX

Checking Dani Rodrik’s blog I’d noticed a new post that’s really pretty sharp. First, Dani had noticed an interesting post at Vox’s Global Crisis Debate by Katherina Pistor.  I liked Katherina Pister’s post  at Vox too.  In fact, I’d say that Dani actually underestimates the potential of the thinking that underlies that post.  The key excerpt:

The major argument against standardization as the cure all for financial crisis, however, is not that the wrong model was chosen. Nor is it the most common critique of legal standardization, namely that one model does not fit all. Instead, the idea that effective market regulation can be achieved by standardizing rules and regulations on the most successful model at the time is deeply flawed for the following reasons. First, it treats legal institutions as endowments and ignores the need for maintenance and adaptation not only to local conditions, but also to future change. Second, it creates the illusion that a given market is institutionally sound and thereby disguises problems that may trigger future crises. Third, the selection of ‘best practice’ models tends to reward regulatory regimes based on simple quantitative outcome variables, such as market size, even when market size may be the product of a bubble, while ignoring volatility and other risk factors.

So here’s my response to Dani (cross-posted over at his excellent blog also):

Continue reading “Katherina Pister’s comments at VOX”

Katherina Pister’s comments at VOX

Calculations re Unpleasant Arithmetic

Dani Rodrik has a post that’s relevant to all the discussion about the stimulus aka “bailout” money being spent:

Some unpleasant Keynesian arithmetic

How much of a boost to economic activity will a fiscal stimulus provide? For those who believe that we have entered a Keynesian world of shortage of
aggregate demand–me included–the answer depends on the Keynesian multiplier.  The size of this multiplier depends in turn on three things in
particular, the marginal propensity to consume (c), the marginal tax rate (t), and the marginal propensity to import (m).  If c=0.8, t=0.2, and m=0.2,
the Keynesian multiplier is 1.8 (=1/(1-c(1-t)+m)). A $1 trillion fiscal stimulus would increase GDP by $1.8 trillion.

Now suppose that we had a way to raise the multiplier by more than half, from 1.8 to 2.8.  The same fiscal stimulus would now produce an increase in
GDP of $2.8 trillion–quite a difference. Nice deal if you can get it.

*In fact you can. It is pretty easy to increase the multiplier; just raise import tariffs by enough so that the marginal propensity to import out of
income is reduced substantially (to zero if you want the multiplier to go all the way to 2.8).  Yes, yes, import protection is inefficient and not a
very neighborly thing to do–but should we really care if the alternative is significantly lower growth and higher unemployment?  More to the point, will
Obama and his advisers care?*

The clear conclusion is that, to prevent free riding, their will need to be international co-operation to prevent backsliding into protectionism:

The way out of this dilemma is to get the rest of the world to engage in fiscal expansion at the same time–so that the gift is returned.  The good news here is that China is playing along and hopefully the Europeans will too (if they can convince Germans to get over their weird obsession with fiscal conservatism).

A first I’d thought, oh no, this is just similar to the classic prisoners dilemma: defect or cooperate. To defect is an evolutionary stable strategy, and so the chances of co-operation as we move forward should be pretty low. But this conclusion is flawed.  The classic prisoner’s dilemma’s essential conditions include a limit on informational flow between the players–if that breaks down, the whole game is different. (Recall how explicit informational states are in John von Neumann‘s The Theory of Games and Economic Behavior)  Clearly informational flows are anything but restricted as consensus is built for the various stimulus programs.

But still it’s worth noting that policy makers can increase the payback from a stimulus package by instituting import controls.

Follow-up, from the Financial  Times:

Continue reading “Calculations re Unpleasant Arithmetic”

Calculations re Unpleasant Arithmetic

Crowdsourcing the G20 Agenda…

As covered at Dani Rodrik’s excellent weblog, here’s your chance to form the G20 agenda…of course, it’s not really very broadly crowdsourced, just to “professional economists,” that is to those who are paid to be wrong about the economy, as opposed to those who are just normally wrong about the economy…

Want to shape the G20 agenda?

Here is your chance. launched today its Global Crisis Debate, a partnership with the UK government aimed at generating ideas for the April 2 summit of the G20.

The debate is organized around five headings:

  • Development (Moderator: Dani Rodrik)
  • Macro (Moderator: Philip Lane)
  • Regulation (Moderator: Luigi Zingales)
  • Institutional reform (Moderator: Francesco Giavazzi)
  • Open markets (Moderator: Richard Baldwin)

The debate on economic development is off to a good start with contributions from Nancy Birdsall, Jose Antonio Ocampo, Arvind Subramanian, and Yung Chul Park along with a lead commentary from me.  I look forward to your input.

Crowdsourcing the G20 Agenda…